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ELASTICITY, Elastic Demand: Decrease in Price increases total revenue;…
ELASTICITY
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Income Elasticity of Demand: measures the degree to which consumers respond to a change in their incomes by buying more or less of a particular good.
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Cross Elasticity of Demand: measures the sensitivity of consumer purchases of one product (X) to a change in the price of some other product (Y)
Formula:
Exy= percentage change in quantity demanded of product X/
percentage change in price of product Y
Independent Goods: When cross elasticity is zero or near zero, the two products are unrelated or independent goods.
Complementary Goods: When cross elasticity is negative it means an increase in the price of one decreases the demand for the other (X and Y go together)
Substitute Goods : When cross elasticity of demand is positive it means the sales of X move in the same direction as a change in the price of Y, then X and Y are substitute goods
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